Detailed explanation of factors affecting Amazon product pricing and pricing strategies

The price of products on Amazon greatly affects buyers’ purchasing decisions. Everyone likes relatively cheap products. It is crucial for sellers to understand the factors that influence Amazon product pricing and the pricing formula.

Factors affecting product pricing

Market factors

• Market supply and demand: Market supply and demand have a significant impact on product prices. When a new product becomes popular on the market, supply may exceed demand, leading to price increases. Over time, when more merchants start selling the product, buyers have more choices and the price gradually drops.
• Competitors’ Prices: Although your competitors’ prices should not be copied directly, their pricing strategies can serve as an important reference for pricing and adjusting your own product prices.

Product cost

• Platform commission: Amazon charges different proportions of commissions based on different categories, usually between 8% and 17%.
• Production costs: Including raw materials, research and development, production, labor and other costs. If the seller does not have its own factory, the procurement cost also needs to be considered.
• Transportation costs: Transportation costs will be incurred in every step from the factory to online sales. If you choose FBA to ship, you will also need to bear FBA first-leg fees and warehousing fees.

Expected profit

Sellers usually take expected profits into consideration when setting prices, and some sellers may set higher profit margins.

Brand image positioning

Different brand positioning determines different price ranges. Product prices are lower in the low-end market, moderate in the mid-range market, and higher in the high-end market.

Marketing and promotion expenses

In order to expand sales, sellers may need to conduct paid marketing promotions within Amazon or on external social media platforms, which is also a considerable expense.

Other factors

• Capital turnover: In order to speed up the flow of funds, some sellers may adopt a small profit but quick turnover strategy.
• Consumer spending habits: The shopping habits of consumers in different countries may also affect pricing.
• Handling of liquidated products: Products that have not been sold for a long time may be sold at a discount.

Pricing reference formula

• FBM product selling price = product cost + platform commission + warehousing and logistics fee self-delivery + expected profit + other expenses
• FBA product selling price = product cost + platform commission + FBA first leg fee + FBA fee + expected profit + other fees

Product Pricing Tips

1. The role of the number 9: Taking advantage of consumer psychology, setting a price point such as 9.9 or 19.9 is attractive.
2. Differential Pricing: Influence sales of lower-priced products by presenting a range of products with similar features and offering higher-priced options.
3. Consumables Pricing: For example, earn ongoing revenue by selling razor cartridges at a low price and replacement blades at a high price.

The above information combines views from multiple sources and is designed to help Amazon sellers better understand the various factors that affect product pricing and their pricing strategies.